Here’s what the ECB has been buying with the special pandemic asset-purchase program that it is set to expand


Analysts expect the European Central Bank to expand the capabilities of its €750 billion Pandemic Emergency Purchase Program when it meets on Thursday.

A breakdown released by the central bank on Tuesday showed it is bought €235 billion ($263 billion) of assets through the end of May, with €103 billion of purchases in April and €116 billion in May.

So far, the ECB has focused nearly all of PEPP on government bonds. It purchased €186.6 billion of public-sector securities using the program.

It disproportionately bought Italian bonds relative to what’s called its capital key, with Spain and perhaps surprisingly Germany a winner, while France was the main loser, according to an analysis from Pictet Wealth Management strategist Frederik Ducrozet.

(The ECB’s capital key is each country’s share of the capital of the central bank, which is based on population and GDP.)

The ECB’s actions have helped to limit the spread between Italian bond yields and Germany’s.

The yield on the 10-year Italian government bond
TMBMKIT-10Y,
1.509%

has dropped to 1.52% on Tuesday from 2.38% in the middle of March.

The yield on the 10-year German government bond
TMBMKDE-10Y,
-0.411%
,
which has been negative for more than a year, was -0.41%.

The ECB also stepped into the commercial paper market, buying €35 billion of securities there, while it is only purchased €10.6 billion of corporate bonds.

Isabel Schnabel, an ECB executive board member, said in an interview with Perspektiven der Wirtschaftspolitik that the program helped to calm financial markets.

Ahead of the ECB move in March, equity prices, as gauged by the Stoxx Europe 600 index
SXXP,
+1.57%
,
continued to fall, the spreads on government bonds widened noticeably and market liquidity dried up, she said. “You could observe the financial market data deteriorating by the second. The ensuing risks to growth, employment and price developments were considerable,” she said. “PEPP calmed the markets and contained fragmentation in the euro area.”



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Joe Biden has called for rent forgiveness during the coronavirus pandemic — here’s how that would work


Former vice president Joe Biden has thrown his support behind canceling rent.

During a recent appearance on the Snapchat
SNAP,
-1.47%

show “Good Luck America,” the Democratic presidential candidate said he supported the idea, which has so far been promoted by progressive activists.

“There should be rent forgiveness and there should be mortgage forgiveness now in the middle of this crisis,” Biden said during his appearance. “Not paid later, forgiveness. It’s critically important to people who are in the lower-income strata.”

(Biden’s campaign did not return a request for comment.)

Renters are feeling the adverse effects of the coronavirus pandemic and the resulting economic slowdown acutely.

“The tenant is the most vulnerable person in the economy right now,” said Tara Raghuveer, housing campaign director at People’s Action, a political network devoted to grassroots organizing.

Don’t miss: ‘Landlords are just trying to pay bills like everyone else.’ The coronavirus could hit mom-and-pop landlords hard as tenants miss rent payments

The unique attributes of the coronavirus-fueled economic downturn have indeed hit renters harder than homeowners. Tens of millions of Americans have lost their jobs or been furloughed as businesses shut down to comply with stay-at-home orders.


‘The alternative to not canceling the run is complete, bottoming out of the market.’


— Tara Raghuveer, housing campaign director at People’s Action

Overwhelmingly, those job losses occurred in the service sector, according to an analysis from title insurance company First American Financial Services
FAF,
+0.52%
.
A third of the jobs lost in April were in the leisure and hospitality sector — and most of those jobs were in food service, an industry that is more likely to employ younger workers with less education.

“The young and less educated are clearly more impacted by the service sector consumption contraction, but the young and less educated are also less likely to be homeowners or potential home buyers,” Odeta Kushi, First American’s deputy chief economist, wrote in the report.

A separate study found that more than half of renters nationwide have lost a job because of the outbreak. And before the coronavirus swept the country, research showed that one in four renters was spending over half their income on housing, leaving little money left over for other expenses and emergency savings. Nevertheless, most renters are still making their monthly payments.

Much of the government’s housing relief has focused on homeowners

The housing relief provided thus far hasn’t been sufficient to protect renters from losing their homes or facing serious financial stress, activists say.

The CARES Act, one of the many bills Congress has passed to offer relief to Americans hit by the coronavirus outbreak, did include some protections for renters. It enacted a 120-day moratorium on evictions for tenants living in rental housing covered under the Violence Against Women Act, which includes Section 8 public housing, the rural housing voucher program, and anyone whose rental unit was purchased with a federally-backed mortgage.

That means tenants can avoid being evicted until mid-July — in the meantime, though, they are still technically obligated to pay rent. Some states and cities also issued their own individual eviction moratoriums, but in some cases those have already ended even though the labor market continues to see job losses.


‘A onetime payment is not getting the average, poor working class person out of this crisis — $1,200 just ain’t it.’


— Tara Raghuveer, housing campaign director at People’s Action

The CARES Act also included $17.4 billion in funding for rent assistance, housing vouchers, public housing, and housing for the elderly, but not all renters benefit from that money.

The $1,200 stimulus checks allocated by the CARES Act could also offset housing costs for many renters, but it wouldn’t be enough to meet multiple months’ of rent payments. “A onetime payment is not getting the average, poor working class person out of this crisis — $1,200 just ain’t it,” Raghuveer said.

Comparatively, homeowners have received arguably more assistance. The CARES Act issued a blanket policy that allows any homeowner with a federally-backed mortgage to get forbearance, meaning they can skip up to 12 months’ worth of mortgage payments. There’s evidence that some homeowners have received forbearance even when they didn’t need it.

Also see: Is this a good time to buy a home? Here’s what you need to know to score a deal

What cancelling rent would achieve

The proposals put forward by activists call for rent and mortgages to be cancelled. Rep. Ilhan Omar, a Democrat from Minnesota, has introduced legislation that would bar landlords and lenders from collecting monthly payments and imposing late fees “through the duration of the pandemic.”

(Omar’s office did not return a request for comment.)

Renters and mortgage borrowers, under Omar’s plan, would not owe anything once the rent and mortgage forgiveness policy ended. Any lender or landlord who violated the plan would face penalties.

To supporters of rent forgiveness, this approach will keep people in their homes and out of financial ruin. But some industry experts say that any plan for rent forgiveness would need to take into account the ripple effects cancelling rent would have across the housing finance ecosystem.

“If multifamily landlords, particularly the small mom and pop landlords who own just maybe one to four units can’t make their mortgage payments and can’t stay in business, those are affordable units that are going to be lost to the private market,” said Flora Arabo, national senior director of state and local policy at Enterprise Community Partners, a national nonprofit organization that focuses on the development of affordable housing.

“Rent forgiveness without rental subsidies could be pretty catastrophic for tenants,” Arabo said.

Omar’s plan addresses these concerns, supporters say, because it creates a fund for landlords and lenders so that they could recoup any losses. It would also set aside money to be used to purchase properties from distressed landlords and lenders, which the government would then convert into affordable units.


‘If multifamily landlords…can’t make their mortgage payments and can’t stay in business, those are affordable units that are going to be lost to the private market.’


— Flora Arabo, national senior director of state and local policy at Enterprise Community Partners

These funds act as subsidies in a way, but rent forgiveness activists say it puts the onus on the right party.

“The landlord relative to the tenant has way more power and way more security in this moment simply by virtue of having an asset to borrow against,” Raghuveer said. “Tenants should not be faced with the burden of navigating a government bureaucracy to get their relief.”

Raghuveer’s organization worked with Omar in drafting the bill, which also includes stipulations that landlords who receive assistance provide information on their revenues, refrain from discrimination based on the source of income, and other tenant protections.

The rental industry opposes rent forgiveness

Despite the provisions Omar’s bill meant to support landlords during a period of rent forgiveness, it is opposed by industry groups including the National Apartment Association.

“While we appreciate the intention of legislation like Rep. Omar’s Rent Mortgage Cancellation Act, we need practical and sustainable relief tailored specifically to COVID-19,” Bob Pinnegar, president and CEO of the National Apartment Association, told MarketWatch. “Rent cancellation proposals do not adequately address the problem and fail to recognize that many property owners are in the same dire situation as their residents — substantial loss of income amid ongoing financial obligations.”

Pinnegar added that “all but nine cents” of every dollar tenants spend on rent goes toward paying “mortgage, property taxes, maintenance, payroll for staff managing and maintaining the property among other financial obligations.” Without that money, Pinnegar said the quality of rental housing would decline and job losses could occur.

Instead of rent cancellations, the National Apartment Association supports robust rental assistance, expanded mortgage forbearance and expanded eligibility for landlords for small-business loans, among other policies.

But rent cancellation proponents see little alternative to their proposal as long as the economic damage of the coronavirus outbreak remains. “The alternative to not canceling the rent is complete bottoming out of the market,” Raghuveer said. “And tens of millions of people literally never financially recovering from this moment.”



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Here’s why the Treasury’s record-breaking borrowing won’t dampen Wall Street’s mood, says JP Morgan


Could the U.S.’s fiscal deficits drain liquidity from Wall Street as the Federal Reserve puts the brakes on its bond-buying and investors are forced to absorb the trillions of debt sold by the Treasury this year?

For analysts at JP Morgan, the answer is no.

In a note penned Friday, JP Morgan’s quantitative and derivatives strategy team argue the supply and demand imbalance for government bonds have little to do with liquidity — the potential pool of money that can be injected into the economy.

“By themselves higher government deficits or bond supply do not create or subtract liquidity, as they shift cash from bond investors to bond issuers which is then spent by the government to support the economy as income to consumers and businesses,” they said,

Some have looked at the potential mismatch between the Federal Reserve’s bond buying, as the pace of its operations taper off, and the Treasury Department’s record-breaking issuance this year as a sign that the U.S. central bank’s actions, on net, may not add liquidity to the financial system.

The Congressional Budget Office forecasts the U.S. to run a budget deficit of almost $4 trillion this year, while JP Morgan estimates the Fed will buy $4.2 trillion of assets this year.

See: Fed’s balance sheet tops $7 trillion, shows increased buying of corporate bond ETFs

This line of questioning takes issues with the widely held belief that the Fed’s push to boost credit has restarted the corporate bond market and was partly responsible for the S&P 500 index’s
SPX,
+1.96%

recovery from its March lows. The broad-based benchmark is up around 34% from March 23, this year’s nadir.

But JP Morgan argued central bank quantitative easing still increases the supply of money circulating in the financial system by boosting bank reserves.

Still, the growing need to save by households, businesses and investors may mean much of this liquidity will be withheld. The uncertainty around the COVID-19 pandemic’s impact has frozen industrial and consumer activity as individuals curtail spending across all sectors of the U.S. economy.

Yet for JP Morgan, this only adds fuel to their bullish thesis that the upbeat sentiment in Wall Street and rally in asset prices has further room to run.

“As the need for precautionary savings subsides over time this liquidity force would become more intense as more of the extra cash that was previously injected would start circulating in search for yield, chasing non-cash assets such as equities and bonds,” they said.



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Is the stock market closed today? Here’s everything investors need to know about Memorial Day trading hours and closures


Memorial Day will take on an even more somber tone this year. The occasion honors the women and men who died serving their country, and the holiday has become an unofficial start to summer, synonymous with backyard barbecues and festive parades.

This year, however, the public-health crisis that has stricken the globe will offer an additional dimension to the act of service, sacrifice and patriotism in America.

Coronavirus has claimed over 97,000 American lives and 45 million jobs, by one measure, and accelerated seismic shifts in the economy, hastening the bankruptcies of some major retail chains, including J.C. Penney Co.
JCPNQ,
+7.23%

and Pier 1 Imports Inc.
PIRRQ,
+7.14%
.

And most Americans are still largely shut in at home, as baseball stadiums and malls remain empty.

That said, the holiday is likely to be viewed as a welcome point for reflection about what’s transpired over the past month, with public-health professionals, store workers and delivery staff on the front lines of the battle against an invisible assailant.

Early efforts to restart business activity are under way in all 50 states in various stages after lengthy closures imposed to curtail the spread of the contagion. The reopenings have some hopeful on Wall Street and on Main Street.

For its part, the financial market has been attempting to claw back mightily from a rout inspired by the economic impacts of the viral outbreak.

The Dow Jones Industrial Average
DJIA,
-0.03%
,
the S&P 500
SPX,
+0.23%

and the Nasdaq Composite Index
COMP,
+0.42%

were all headed into the holiday holding on to gains of at least 3%, as of Thursday’s close.

The Nasdaq Inc.
NDAQ,
+1.18%
,
which operates the Nasdaq will be closed on Monday, Memorial Day; and the New York Stock Exchange, owned by Intercontinental Exchange Inc.
ICE,
+0.98%
,
also will be shuttered for the holiday. When investors return on Tuesday, the NYSE will also welcome “a subset” of traders to the floor after closing the trading floor on March 23 in response to the pandemic.

The Securities Industry and Financial Markets Association, a brokerage-industry trade group that sets procedures for the bond market, advises bond dealers to close an hour early, at 2 p.m. Eastern on Friday, and remain closed on Monday.

Regular trading for U.S. oil
CL.1,
+0.63%

on the New York Mercantile Exchange and metals
GC.1,

on Comex will be closed for Memorial Day.

Meanwhile, it is also a bank holiday in the U.K, and the London Stock Exchange, and notably the FTSE 100
UKX,
-0.36%
,
will be shuttered. Other European bourses, however, will be open.



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Colleges balance student safety with falling revenues during coronavirus — here’s how universities will be transformed in the fall


It’s safe to say college will be a very different experience for students this fall than what they imagined. But right now, that’s pretty much all they can be sure of.

As the coronavirus pandemic swept the country this spring, colleges almost uniformly moved students from lecture halls and dorms to virtual classrooms and quarters cramped with family. But with the fall semester looming, college officials’ plans are varying widely.

The California State University system plans to deliver classes primarily online for fall 2020. At the University of Notre Dame, officials are planning for students to return to campus on August 10 — two weeks earlier than typical — and for them to continue without breaks until Thanksgiving. The fall semester will begin as scheduled on Aug. 26 at the University of Texas at Austin, and classes will run until Thanksgiving. Students will not return after Thanksgiving and, instead, will participate in reading days and final exams remotely. New York University and Boston College have said they intend to open their campuses this fall, subject to government health directives.

See also: ‘There will be less patience in the fall’: 100 ‘unprecedented’ student lawsuits suing colleges amid coronavirus outbreak

Overall, roughly 68% of colleges are planning for in-person instruction this fall, compared to 6% who are planning for an online fall semester and 6% who have said they would do some kind of hybrid, according to the Chronicle of Higher Education, which is tracking these announcements.

But students could face a long wait for definitive answers on how their fall will look. Many colleges are likely avoiding big pronouncements about their plans as a way to sustain enrollment, said Catherine Bond Hill, managing director at Ithaka S + R, which consults with universities and nonprofits, and the president emerita of Vassar College. If families get wind that their college is going solely online in the fall, students may be hesitant to enroll.

When students and faculty scattered in the spring, “everybody was hopeful things would be back to normal in the summer and that things would be back to normal in the fall,” she said. “The reality is that we just don’t know enough yet.”

Given that uncertainty, “the only decision you can really make now that you can commit to is that you’re going to be online,” she said.

Are you a student or parent thinking about your college plans for the fall? We want to hear from you. Email jberman@marketwatch.com

As college officials weigh their options, they’re considering a variety of factors. Of course, the health and safety of their students, faculty and staff is top of mind, but finances are also likely playing a role. If a college chooses to go online and loses students as a result, they also lose the revenue that comes with them. Even if students do still enroll in an online environment, the schools will forgo the money they receive from residence halls and dining facilities. At the same time, taking the precautions necessary to open up safely will also be costly.

“One of the greatest things about a university is that it’s a living and a learning environment for students who come from all over, internally and nationally, and they live, and work, and play on a campus,” said Jean Chin, an associate clinical professor of medicine at the University of Georgia, who is also chairing the American College Health Association’s COVID-19 task force. “It’s one of the great challenges too because this virus requires you to be physically distant from each other.”

Lawrence Schovanec, the president of Texas Tech University, is in the process of nailing down the details of a physically distant, in-person university experience. He announced last month that Texas Tech will be doing a phased-in return to campus this fall.

“It’s not going to be the same experience they left in the spring,” he said. Schovanec and other officials are working through the specifics of what that will look like. They’re considering issues ranging from how to move pedestrians through campus without crowding, to whether to adjust dismissal times for classes to reduce the number of people walking through hallways at once, to how they might deal with residence halls. As of last week, dorms looked like they would be booked to nearly 100% capacity, but “we can’t have that,” Schovanec said.

The school has already determined protocols for how it will let researchers back to campus — there will be temperature checks and closed water fountains, among other restrictions — but officials are still not yet sure what exactly the experience will be like for students. Texas Tech’s provost solicited from every department details on how they plan to deliver their courses and how the school proceeds will depend in part on those plans.

Right now, Schovanec said he expects that 25% of the courses offered will be face-to-face, about 25% will be offered purely online and 50% will be offered in some kind of hybrid. “You have to look at every classroom and we’re allowing a certain number of square feet per student,” he said. “If you were to do that and comply with CDC guidelines a rough estimate would be that we would be at 25% capacity of the room.”

The idea that students might choose not to enroll at Texas Tech for the semester if the school went fully online in the fall factored into the school’s plans, Schovanec said. “I believe that when students choose an institution they become tied to an institution by virtue of the culture of that institution, not just what happens in the classroom and that culture is developed and conveyed through personal interactions,” he said. “I heard from students and from parents, ‘I didn’t choose Texas Tech to sit at home to be taking online courses.’”

The school is projected to lose an estimated $20 million in revenue this spring and summer because of the move to a virtual-only campus. Most of the loss is related to not charging fees associated with being on campus. Enrollment numbers currently appear strong and the school has budgeted for enrollment decreases, but a drop of more than 20% would require the school to take “drastic measures,” Schovanec said. He said he’s also cognizant that some parents may be hesitant to send their students to school in this environment, which is why officials are thinking through how they plan to communicate their safety plans to families.

For years, colleges have been under financial pressure thanks to losses in state funding, demographic trends that portend declining enrollment, and other factors. The pandemic has exacerbated those challenges, said Robert Kelchen, an associate professor of higher education at Seton Hall University. Colleges are likely to be forgoing tuition revenue and losing out on state funding and fundraising as the economic devastation from the pandemic continues. Colleges have a financial incentive to open up to counter the losses they’ve already experienced and likely will continue to see, Kelchen said.

But opening up schools safely will be costly too. Chin’s task force has offered schools a slew of recommendations for reopening that include access to potentially expensive testing supplies, masks, and physical changes to facilities, like installing plexi-glass walls around some public desks. To open safely, colleges will also need space to isolate infected students or employees.

Other costs could include cleaning facilities, hiring more faculty to help reduce class sizes, and extending hours for research labs so that employees can stagger their time, Kelchen said. “All of those little unseen costs,” he said. Schovanec said he’s not yet sure of the costs of the safety measures his school will take. “When it comes to these issues that relate to safety we suspend the concern of the cost,” he said.



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